DJ Builders Company began operations on January 1, 2008. During the year, DJ Builders Company entered into a contract with Joey Company to construct a manufacturing facility. At that time, DJ Builders estimated that it would take five years to complete the facility at a total cost of P 4,800,000. The contract price for construction of the facility is P 5,800,000. During 2008, DJ Builders incurred P 1,250,000 in construction costs related to the project because of rising material and labor costs, the estimated cost to complete the contract at the end of 2008 is P 3,750,000. Joey Company was billed for and paid 30% of the contract price in accordance with the contract agreement. It is further agreed, that any costs incurred is expected to be recoverable. Compute the amount of construction in progress (net) – due from customers or progress billings (net) – due to customers: (Zero profit approach) Percentage of Completion Method Cost Recover Method of Construction Accounting P 290,000 due to P 490,000 due from -0- due from P -0- due to P 490,000 due to P 290,000 due to P 490,000 due from P 290,000 due from

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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DJ Builders Company began operations on January 1, 2008. During the year, DJ Builders Company entered into a contract with Joey Company to construct a manufacturing facility. At that time, DJ Builders estimated that it would take five years to complete the facility at a total cost of P 4,800,000. The contract price for construction of the facility is P 5,800,000.

During 2008, DJ Builders incurred P 1,250,000 in construction costs related to the project because of rising material and labor costs, the estimated cost to complete the contract at the end of 2008 is P 3,750,000. Joey Company was billed for and paid 30% of the contract price in accordance with the contract agreement. It is further agreed, that any costs incurred is expected to be recoverable.

Compute the amount of construction in progress (net) – due from customers or progress billings (net) – due to customers:

(Zero profit approach) Percentage of Completion Method

Cost Recover Method of Construction Accounting